Big Office Broker Stephen Siegel Talks Rents, Rivalry, Rudy

Location: We’ve got problems with the credit market. Some people are panicked and say we’re not going to see the same high prices in the commercial real estate market—what do you think?

Mr. Siegel: My opinion is that we’ll see these prices, and maybe we’ll see a little bit of a pause; but I think we’ll see an acceleration in those prices again at some point in the future. We’re at a point in time where the fundamentals in the real estate market here change, and they’ve changed for good. … Now the pause can be three months to six months; it can be six months to 18 months. But I don’t think the market retrenches to a significantly lower level, and I think that when it comes back, it comes back strong.

Office rents keep rising and don’t seem to have a limit. Why is that?

I guess there has to be a limit, but what is the limit? And I don’t know the answer to that, but I know that we still rank somewhere in the bottom half of the top 25 cities. Certainly, London is north of $200 a foot on a net basis for comparable space, so that would presume that we still have some growth for some of the higher-end stuff. I heard some rents recently as high as $180 for smaller units of space in a couple of buildings here in Manhattan.

Can $180- or $200-per-square-foot rents become the new $100 rent?

I guess it’s possible. I think for a while that’s going to be isolated rent, but then again I think there are landlords out there who believe they have product, and enough demand and not enough supply, that something in the $140-to-$150 range in a couple of years is going to be the new price.

Your investment group, SG2, has been spending hundreds of millions in the Bronx. Why?

You go to the Bronx, you see cranes everywhere, you see activity, you see life, you see people looking to move there for affordable housing. We’re very much focused on the need for affordable housing, easy commute to Manhattan, all the amenities you could possibly want—no different than Queens, no different than Brooklyn, which has enjoyed a renaissance for 20 years, neighborhood by neighborhood by neighborhood.

It was really the Bronx’s time, because it had all the infrastructure, and it just needed some forward-thinking leadership in order to create the type of environment and, I guess, a general evaporation of the stigma.

You spent $300 million on an apartment portfolio in the Bronx. You must have made a lot of money. Should I get into the business?

No—yes, you can—I’m trying to get my son, who’s 20, to go into our business. I’ll let you know—he’s still thinking about it. He’s a junior in college. I think this is a wonderful business. Obviously, being a broker has nothing to do with the investment side of it; I spent my whole life doing it. Ninety-nine percent of my life focused on the brokerage business only.

Who are the next big young brokers at CBRE? Who’s the next Stephen Siegel, the next Mary Ann Tighe?

I can’t answer that, because if I give you my opinion, then all the ones I don’t mention will be really angry with me. That would be so difficult, it really would be. There are a couple of dozen kids here that I’ve gotten to know, and I don’t know a lot of them.

I was actually at a wedding Saturday night, and some kid said hello to me and he starts talking about the business and this and that, and I go, ‘Who are you with?’ And he says, ‘CB.’ I was mortified.